Renting vs. Buying: Pros and Cons
Renting vs. Buying: Pros and Cons of Each
Should you rent a home or are you better off buying? The answer depends on your individual circumstances, preferences and your stage of life. The right answer to the question may prove different when you’re 25 as opposed to a decade later, and your financial status at any given time.
Pro: In terms of upfront costs, renting is less expensive. While you are responsible for the required security deposit and monthly rental fee, you don’t have to worry about saving up a substantial down payment, as occurs when purchasing property. Pro: If you want flexibility, you can simply move elsewhere at the end of your lease, rather than go through the often time-consuming and stressful process of selling your house.
Pro: Budgeting is simpler, since rent is a fixed amount.
Pro: The landlord takes care of any necessary property repairs, and in most cases, it won’t cost you a dime. There are exceptions, depending on the language of your lease and the nature of the repairs.
Con: The lease spells out restrictions on your use of the rental unit. Failure to abide by them can cost you the tenancy. Those restrictions may include having another person live with you if their name is not on the lease. If you bring a pet into a rental dwelling where animals aren’t allowed, you will probably have to rehome it if your landlord discovers you are breaking the lease.
Con: Rent increases at the end of a lease are often steep.
Pro: When you rent, that money is gone at the end of every month. When you buy, you build equity in your home with each mortgage payment. At some point, you may have enough equity to borrow against it in the form of a home-equity loan to pay for college, a car or some other pricey necessity. You can also make extra principal payments to own your home outright sooner. When you sell, you do not have to pay taxes on capital gains above a certain amount.
Pro: When you own your home, you aren’t subject to a landlord’s rules on pets, redecorating, remodels or other strictures that are an owner’s prerogative.
Con: You must make repairs yourself or call the appropriate professional when something goes wrong, and it is all on your dime unless there is a warranty on the item in question. Repairs and other house-related expenses can also blow a hole in your budget.
Con: While renters can get away with relatively cheap renter’s insurance to protect their belongings, homeowners must pay for home insurance, property taxes, water and sewer service and possibly flood insurance, depending on the area.
The Wild Card
One wild card in the decision to rent or buy involves the Republican Congress’ tax overhaul. States with high state and local property taxes, as well as high home prices – such as Hawaii – will suffer if property tax and mortgage interest deductions are limited. Buyers will have to factor in extra costs, while landlords will likely pass those additional costs onto renters.
If you’re looking to buy, sell or rent a home, you need a knowledgeable, experienced realtor. Contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.